An instructive example

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The Oregon Business Development Department’s network of about 45 economic-development officials has more than doubled the time spent reaching out to clean-tech companies since 2008, said Bruce Laird, clean-tech recruitment officer in the department.

As a result, Oregon’s incentives for attracting clean-tech firms — those that make alternative energy or energy-efficient products — are among the most aggressive in the nation. The state’s business energy tax credit funds 50% of a renewable-energy manufacturing facility’s cost, up to a total credit of $20 million per project. That dwarfs similar incentives in states such as Hawaii, which caps credits at $2 million, according to the Database of State Incentives for Renewables and Efficiency. From 2006 to mid-2009, Oregon spent $386 million on tax credits for clean-tech companies, according to the state Energy Department.

According to a recent Pew study, Oregon had 19,000 clean-tech jobs in 2007, up 50% from 1998. About one of every 100 workers in Oregon works in the clean-tech industry, the largest percentage in the nation.

This is an instructive example of targeting an industry. Here are a couple of observations:

1. It’s going to be tough to compete in this space with states like Oregon. They issued $386 million in tax credits in three years. Adjusted for population, that would be like New Brunswick issuing $100 million in tax credits – to one industry.

2. They have doubled their clean tech industry employment in 10 years. That’s the kind of target we need for growth sectors in New Brunswick.

3. If you read the full article you will see many examples of multinational firms attracted to the state. We must be able to attract anchor firms into our targeted growth industries.

4. This case study made the Wall Street Journal. I am not that ambitious but I think if New Brunswick is successful in building growth sectors – it will get noticed. When was the last time we had a story in the national press about a specific growth sector that is booming in New Brunswick? I read stories about tax cuts, forestry problems, Bernard Lord’s political future, etc. but I can’t remember the last time the national press picked up on a specific sector growth strategy. I will say there have been several energy hub stories in the national press but most of them were forward looking (new refinery, second nuclear plant, energy corridor) not a backward evaluation of a success story.

9 thoughts on “An instructive example”

A couple years ago, UNB submitted a clean tech proposal to the NCE program. It did not make it through the first screening.

Perhaps it was a crap proposal but it is typical of all federal funding programs; we are not taken seriously.

This is where our provincial leadership needs to go to work. They should be supporting such initiatives and telling the Feds to keep their highway money until they do something meaningful for economic development.

Any more details on that? Thats exactly the kind of smoking gun that we’ve really been looking for. SOMETIMES it is a ‘crap’ proposal, but its not like crappy proposals haven’t been funded in other parts of the country. But the devil may lie in the details, like the states its often the provinces that fund energy proposals, and the feds stay out of them. I recall a big gas boom about six years ago in PEI, however, the province had to fund exploration all by itself. To their credit they set up a grassroots investment program, unfortunately it turned out to be a scam, but when is the last time the province of NB (or any other province for that matter) has set up such a funding initiative?

> They issued $386 million in tax credits in three years. Adjusted for population, that would be like New Brunswick issuing $100 million in tax credits – to one industry.

It’s very misleading to represent the tax credit in per capita terms.

What would it be adjusted for tax base? What would it be adjusted for taxes the industry would otherwise pay? What would it be adjusted for taxes plus health insurance premiums? What would it be adjusted for varying levels of federal taxation and industrial support?

The American tax system is very different from the Canadian system. Simply running a per capita comparison obscures that distinction.

Moreover, focusing on the tax advantage given to the sector in Oregon also misleads with respect to important other distinctions between Oregon and New Brunswick. Oregon, especially, has been the locus for numerous quality-of-life reforms over the years.

Look at the first paragraph of their business plan: “Oregon is a special place to live, and Oregon’s quality of life helps attract and retain talented people who drive our economy. Access to the outdoors and recreation, arts and culture and safe communities are among many Oregon assets that can support economic prosperity.”http://www.oregonbusinessplan.org/sub_plan_place.html

No amount of tax breaks in the world can make up for a poor quality of life; that’s why nobody relocates to Somalia.

Oregon’s business plan incorporates ‘Four Ps’: people, place, productivity and pioneering. http://www.oregonbusinessplan.org/plan_fourp.html It is very important to focus on all four, rather than to write as though tax credits were the missing link or the magical tool that Oregon is using.

First of all, per capita is fine as a general way to adjust for scale. As a percentage of total taxes would be another one but the point is that Oregon has made a serious focus out of this industry and I would like to see that here.

As for the Oregon business plan I am very familiar with it as I reviewed it for a client. I have blogged about it here.

Excellent post, I haven’t read through all the winners, but ONE commonality is private sector funding. The NB proposal isn’t available, but certainly from the article it sounds very much like government money is the ‘seed money’ and if there are NO private sector funders the government is suspicious that within the five year framework it can be financially viable.

Just for example, in 2007 when applications were sought, the London bid, which was aimed at ‘green energy’ like NB’s, had over 100 projects already underway.

The Centres of Excellence is something that isn’t discussed much here, but really should be. The article is a little misleading since the ‘centres of excellence’ is a network thats been set up since 1989. So its likely the feds didn’t want this money to fund a NEW centre, since this particular funding is for commercialization.

In the Centres of Excellence though I think we have at least some evidence of an anti maritime bias. Nova Scotia has six universities, a medical school, and they are also severely neglected. UNB has a presence in ‘insect pest management’ as well as, oddly enough, ‘molecular and interfacial dynamics’. Whether thats due to ONE professors work, one companies work, or a group of professors in an institute I don’t know.

It’s worth noting that none of the 2009 recipients were from the atlantic provinces either. In fact,all recipients were from ontario and BC, one from Quebec. It seems that even individual professors can apply for this grant now.

This is not an ‘excuse’ for the feds. I’m trying to find whether this NB group has received any other funding. What is clearly happening here is that the ‘centre of excellence’ is pigeon holing the maritimes into agriculture, fisheries, and forestry. And even those are usually overshadowed by other provinces. For example, there are 4 centres funded in one specific category, none are in the east, and there is a forestry one-but located in quebec. Many of the fisheries grants go to ontario, a province with barely any fishery (but lots of research).

This is important because it shows exactly how universities play a part in ED. Three centres were ‘exemplars’ to recieve follow up funding. They inclued Auto21 (goes without saying), The Canadian Water Network (UNB may have a presence there, they have some kind of ‘river network’ centre at UNB), and the Stem Cell Network (showing that the conservatives aren’t the same as republicans:)

Without a presence in bio-medical or technology, New Brunswick is at a real disadvantage. However, its a real Catch 22, because NB doesn’t have the private markets to invest. To echo a previous post, Irving bears some responsibility for this. They have talked ‘green energy’ and if they aren’t anteing up some funding here then it puts the group at a disadvantage. I guarantee that all the auto makers are putting money into Auto21.

What is even MORE interesting from the article is that BNB is actually paying a private consulting firm to do THEIR job. And paying them a LOT, for what is definitely pretty shaky results. For $500,000 how many leads have they produced for Northern NB? Hell, I can produce leads! I’ll even cold call and find the right executive for that kind of money!

“For $500,000 how many leads have they produced for Northern NB? Hell, I can produce leads! I’ll even cold call and find the right executive for that kind of money!”

Given the controversy surrounding that untendered contract, has any journalist ever done any follow up on Roc Consulting? What kind of results are we getting for our money? Do we have any idea what they’re doing over there? Have they had any success?

The whole centres of excellence approach is often difficult to interpret in a meaningful way. A few years ago, while still in the public service, my move to a new location was handled by a federal ‘centre of excellence in relocation’. Bit of a meaningless buzzword in many ways; a mechanism for the feds to get photo ops or managers to grab promotions.

In many cases, the ‘centre’ is just where the lead investigator is located, with the funding widely dispersed across the country. An analogous approach can be seen within AAFC, where one research centre might have the ‘lead’, but most of the bucks are actually spent elsewhere. So we have to see where the money is really being spent to determine who is benefitting. As to the subject matter, you can clearly see that the ‘hot’ topics often go where the most political bang can be obtained. Political lobbying often plays a big role in what goes where, and NB does not have much political clout.

If NB wants to develop a particular sector, then there needs to be a coordinated strategy (involving the unis, GNB, BNB and the feds) that either builds on an existing industry or brings in a new anchor. Without that, we will just get more of ACOA handing out tourism dollars to Hartt Island. NB is in a very weak position at the moment; there are few cards to play and no coordinated strategy appears to be in place to change anything for the better.